Tax em' if you've got em'? Phil Murphy wants levy on e-cigarettes

Before Mike Moran was a small business owner and an e-cigarette evangelist, he was a smoker.

He picked up a cigarette as a teen and didn't quit until about six years ago, when he swapped it out for a Kangertech E-vod.

Moran, 48, says vaping helped him do what 14 years of sheer effort and smoking cessation drugs couldn't, and he's paying it forward through his Firehouse E-Cigs & Vapors shops. He opened his store on the lot in Cherry Hill where as a teenager he used to buy and smoke cigarettes.

"This is where I started smoking. So maybe if I can stop some other folks from smoking, maybe I can earn my wings back," Moran said.

Borrowing from a bill that's languished in the state Legislature, Murphy's state budget anticipates raising $59 million from new taxes on e-cigarettes and tobacco products in New Jersey for cash-starved state coffers.

That bill combines a 75 percent wholesale tax on e-cigarettes with a rise in the wholesale tax on tobacco products from 30 percent to 68 percent and per-ounce hikes on other tobacco products.

Murphy's state Treasury Department clarified last week that its own mix is still in flux.

Catherine Brennan, deputy treasurer, said the administration is reviewing how price will affect demand, and aiming at a rate that's competitive with nearby states.

"There is discussion that has been ongoing making sure our tax rates are competitive with Pennsylvania," she said. "We want to make sure our rates are competitive, so we haven't finalized what that legislation is going to look like," she said.

Moran argued if lawmakers cared about people's health, they wouldn't be after the money at all.

"Whether they make it 75 percent or 40 percent or 30 percent, all it does is show they'd rather steal money than have people quit smoking. And to me, that's just insanity," he said.

E-cigarette expert and manufacturer Mark Anton predicts these sin taxes will shutter many of the nearly 300 vaping stores across New Jersey and gouge existing customers and tobacco smokers looking to make the switch.

"At this tax rate they'll eradicate our industry," he said.

"Everyone is telling smokers they need to quit. They quit. They use this product now. But if you tax it at 75 percent, where are they getting their products if the stores close up?," Anton continued, adding it shouldn't be taxed any more than nicotine gum or patches should be.

Pennsylvania's 40 percent levy instituted in 2016 devastated the industry, forcing more than 100 stores, more than 20 percent of the state's retail vapor shops, to close within a year, according to the vapor trade group the Vapor Technology Association.

Anton said it's clear from the sheer size of the tax hikes being considered that it's meant to be punitive and not just merely out of concern for public health.

Murphy, an advocate for legalization, is only pushing a 25 percent excise tax on marijuana, he noted.

"Does the governor prefer New Jerseyans get high over quitting cigarettes?" he asked.

State Sen. Joseph Vitale, D-Middlesex, who's behind the original bill the administration incorporated into the $37.4 billion budget proposal, says, it's actually designed to do both.

"For a long time I have been interested in having some level of tax parity" between vaping and other tobacco products, he said. "It's going to raise revenue but advocates say it also serves as some level of deterrent" to smoking and vaping.

Anton said supporters of this tax overlook e-cigarettes' contributions to smoke cessation. Vaporizers and e-cigarettes are billed as the healthier alternatives to tobacco cigarettes, delivering nicotine and your choice of flavors without the nasty carcinogens and lingering smell of combustible cigarettes.

Most of the state's shop owners are smoking converts, Anton said. Addicts who were liberated with the help of e-cigarettes and vaporizers and want to help others quit, too.

Moran, who owns shops in Cherry Hill and Deptford and a small wholesale distribution company that employ 16 people, is one of the converted.

But with the wholesale tax looming, Moran said he's prepared to take his business out of state.

"New Jersey is never going to see the revenue. All they're going to do is put stores out of business, make people lose their jobs and perpetuate the cycle of smoking in the state," he said,

But detractors say this growing industry isn't just advertising to lifelong smokers, but to teens who've never picked up a cigarette.

About 20 percent of adults 18 to 24 years old have tried e-cigarettes, according to the U.S. Centers for Disease Control and Prevention.

The e-cigarette Juul -- known for flash drive-like shape and such flavors as mango, cool mint and creme brulee -- has come under scrutiny for its popularity with teens.

The nicotine in one Juul pod is equal to a pack of cigarettes.

"As much as someone can vape to reduce their tobacco use and some people have used it to quit tobacco, the vaping industrial complex is addicting a new generation of children," Vitale said.

Moran tries to debunk this sort of gateway theory, saying he'd be better off if he had picked up a flavored vape pen at 14 years old instead of a Marlboro Light.

"You're not going to go from vaping a strawberry-flavored vape to smoking a Marlboro Red," he said. "You're not going to go from chewing on fresh fruit to chewing on a garbage can."

Including e-cigarettes and vaping paraphernalia in the tax package is critical "because of the drastic increase in their popularity," she said.

In addition to boosting wholesale sales and use taxes on tobacco products from 30 percent to 68 percent, Vitale's bill includes a $2.70 tax on each cigar and 54 cents on each cigarillo at the wholesaler or distributor level. Pipe and smoking tobacco would be taxed at $4.15 per ounce.

Thomas Briant, executive director of the National Association of Tobacco Outlets, which represents 60,000 stores in the U.S., said this, too, will crush retail sales -- and likely without the benefit of persuading many to quit.

Steep tax hikes may discourage some adults from buying tobacco products, but "the vast majority" will simply seek them out elsewhere, driving into nearby states or ordering them online at lower prices, he said.